BRISTOL, Tenn., Aug. 9 /PRNewswire-FirstCall/ -- King Pharmaceuticals,
Inc. (NYSE: KG) announced today that total revenues increased 68% to $462.9
million during the second quarter ending June 30, 2005 compared to $275.6
million during the second quarter of 2004. During the second quarter ending
June 30, 2005, including special items, King reported net income of $20.5
million and diluted earnings per share of $0.08, compared to a net loss of
$62.9 million and a diluted loss per share of $0.26 in the same period of the
prior year. Excluding special items, net earnings increased to $106.7 million
and diluted earnings per share rose likewise to $0.44 during the second
quarter ending June 30, 2005 from net earnings of $12.8 million and diluted
earnings per share of $0.05 during the second quarter of 2004.
For the six months ending June 30, 2005, total revenues increased 47% to
$831.6 million from $567.1 million during the first six months of 2004. During
the six months ending June 30, 2005, including special items, King reported
net income of $90.6 million, and diluted earnings per share of $0.37, compared
to a net loss of $167.0 million and a loss of $0.69 per diluted share in the
same period of the prior year. Excluding special items, net earnings increased
344% to $182.8 million and diluted earnings per share increased 347% to $0.76
during the six months ending June 30, 2005 from net earnings of $41.2 million
and diluted earnings per share of $0.17 during the first six months of 2004.
King recorded special items during the second quarter ending June 30, 2005
totaling a net charge of $132.9 million, or $86.2 million net of tax. These
special items primarily consist of an intangible asset impairment charge
totaling $126.9 million related to Sonata(R) (zaleplon). A reconciliation and
more specific information regarding special items are provided below.
Brian A. Markison, President and Chief Executive Officer of King, stated,
"With record high revenues of $462.9 million, we are pleased with our
financial results for the second quarter of 2005. As we previously projected,
net sales from our branded pharmaceutical products during this three month
period closely reflect prescription demand."
Mr. Markison emphasized, "King's cash and cash equivalents, not including
restricted cash, grew to $565.6 million as of June 30, 2005, an increase of
$217.0 million from $348.6 million as of the end of the previous quarter. As
we continue to maximize the financial contribution of our portfolio of
currently marketed products, we intend to utilize our strong cash position and
enhanced cash flow to seek external partnerships and continue funding the
development of new products that could significantly improve our Company's
prospects for long-term growth."
Net revenue from branded pharmaceuticals totaled $400.3 million during the
second quarter of 2005, an 82% increase from the second quarter of 2004. This
increase was primarily due to higher unit sales of the Company's branded
pharmaceutical products during the second quarter ending June 30, 2005 as a
result of the effect of wholesale channel inventory reductions of some of
these products during the same quarter of 2004 and a decrease in actual
returns of branded pharmaceutical products in the second quarter of 2005 as
compared to the same period of the prior year. The average wholesale inventory
level of the Company's key products was less than one month as of June 30,
2005 according to data obtained from King's major customers.
Altace(R) (ramipril) net sales equaled $144.2 million during the second
quarter ending June 30, 2005, a 120% increase from $65.5 million during the
second quarter of 2004.
Net sales of Skelaxin(R) (metaxalone) increased 71% to $86.8 million
during the second quarter of 2005 from $50.9 million during the same period of
the prior year.
Net sales of Thrombin-JMI(R) (thrombin, topical, bovine, USP) totaled
$52.9 million during the second quarter ending June 30, 2005, an increase of
67% from $31.7 million during the second quarter of 2004.
Sonata(R) net sales equaled $19.3 million during the second quarter of
2005, an increase of 151% compared to $7.7 million during the same period of
the prior year.
Levoxyl(R) (levothyroxine sodium tablets, USP) net sales equaled $41.3
million during the second quarter ending June 30, 2005 compared to $31.8
million during the second quarter of 2004.
Meridian Medical Technologies, King's wholly owned subsidiary, contributed
$35.4 million of net revenue in the second quarter of 2005 compared to $27.7
million during the same period of the prior year.
Royalty revenues, derived primarily from Adenoscan(R) (adenosine), totaled
$19.6 million in the second quarter of 2005 compared to $21.1 million during
the same period of the prior year. Revenue from contract manufacturing during
the second quarter of 2005 increased slightly to $7.6 million from $6.8
million during the second quarter ending June 30, 2004.
Mr. Markison commented, "While improving our financial performance during
the second quarter, we also continued to recruit top-notch talent to enhance
our management team. I am excited about the addition of Joe Squicciarino, as
our Chief Financial Officer, Ric Bruce, as our Corporate Head of Technical
Operations, and several other key employees with proven track records in the
pharmaceutical industry. These talented individuals have already made
significant contributions to our organization."
Conference Call Information
King will conduct a conference call today to discuss the Company's second-
quarter results and other matters pertaining to its business. Interested
persons may listen to the conference call on Tuesday, August 9, 2005, at 1:00
p.m., E.D.T. at http://www.b2i.us/external.asp?b=1084&id=177&from=wc&L=e or by
dialing 866-594-7514 (US only) or 706-643-7504 (international). If you are
unable to participate during the live webcast, the call will be archived on
King's web site http://www.kingpharm.com for not less than 14 days following
the call. A replay of the conference call will also be available for not less
than 5 days following the call by dialing 800-408-3053 (US only) or 416-695-
5800 (international), passcode 3160335#.
About Special Items
Under Generally Accepted Accounting Principles ("GAAP"), "net earnings"
and "diluted earnings per share" include special items. In addition to the
results determined in accordance with GAAP, King provides its net earnings and
diluted earnings per share results for the second quarter and six months
ending June 30, 2005 and June 30, 2004, excluding special items. These
non-GAAP financial measures exclude special items which are those particular
material income or expense items that King considers to be unrelated to the
Company's ongoing, underlying business, non-recurring, or not generally
predictable. Such items include, but are not limited to, merger and
restructuring expenses; non-capitalized expenses associated with acquisitions,
such as in-process research and development charges and one-time inventory
valuation adjustment charges; charges resulting from the early extinguishment
of debt; asset impairment charges; expenses of drug recalls; and gains and
losses resulting from the divestiture of assets. King believes the
identification of special items enhances the analysis of the Company's
ongoing, underlying business and the analysis of the Company's financial
results when comparing those results to that of a previous or subsequent like
period. However, it should be noted that the determination of whether to
classify an item as a special item involves judgments by King's management. A
reconciliation of non-GAAP financial measures referenced herein and King's
financial results determined in accordance with GAAP is provided below.
About King Pharmaceuticals
King, headquartered in Bristol, Tennessee, is a vertically integrated
branded pharmaceutical company. King, an S&P 500 Index company, seeks to
capitalize on opportunities in the pharmaceutical industry through the
development, including through in-licensing arrangements and acquisitions, of
novel branded prescription pharmaceutical products in attractive markets and
the strategic acquisition of branded products that can benefit from focused
promotion and marketing and product life-cycle management.
Forward-looking Statements
This release contains forward-looking statements which reflect
management's current views of future events and operations, including, but not
limited to, statements pertaining to the successful implementation of the
Company's strategy to enhance its prospects for long-term growth; and
statements pertaining to the Company's anticipated conference call to discuss
its second quarter results. These forward-looking statements involve certain
significant risks and uncertainties, and actual results may differ materially
from the forward-looking statements. Some important factors which may cause
actual results to differ materially from the forward-looking statements
include: dependence on King's and Wyeth Pharmaceuticals' ability to
successfully market Altace(R) under the co-promotion agreement between King
and Wyeth; dependence on the future level of demand for and net sales of
King's branded pharmaceutical products, in particular, Altace(R),
Thrombin-JMI(R), Sonata(R), Skelaxin(R) and Levoxyl(R); dependence on the
successful marketing of King's products, including, but not limited to,
Altace(R), Thrombin-JMI(R), Sonata(R), Skelaxin(R) and Levoxyl(R); dependence
of the future effect of generic substitution for Levoxyl(R); dependence on
royalty revenues from Adenoscan(R); dependence on management of King's growth
and integration of its acquisitions; dependence on the extent to which the
Office of the Inspector General ("OIG") of the Department of Health and Human
Services and other governmental agencies concur with King's best estimate of
the extent to which it underpaid amounts due under Medicaid and other
governmental pricing programs and King's determination of the reasons for such
underpayments; dependence on the actual outcome of the ongoing investigations
of the Company by the OIG and U.S. Securities and Exchange Commission ("SEC");
dependence on whether King is able to prevail in pending private plaintiff
securities litigation; dependence on the extent to which any governmental
sanctions are imposed due to King's underpayment of amounts due under Medicaid
and other governmental pricing programs; dependence on King's ability to
continue to acquire branded products, including products in development;
dependence on the high cost and uncertainty of research, clinical trials, and
other development activities involving pharmaceutical products, including, but
not limited to, King Pharmaceuticals Research and Development's pre-clinical
and clinical pharmaceutical product development projects, including
binodenoson, PT-141, and an Altace(R)/diuretic combination product; dependence
on the unpredictability of the duration and results of the U. S. Food and Drug
Administration's ("FDA") review of Investigational New Drug applications
("IND"), New Drug Applications ("NDA"), and Abbreviated New Drug Applications
("ANDA") and/or the review of other regulatory agencies worldwide; dependence
on King's ability to maintain effective patent protection for Altace(R)
through October 2008, and successfully defend against any attempt to challenge
the enforceability of patents relating to the product; dependence on King's
ability to successfully defend against attempts to challenge the
enforceability of patents related to Skelaxin(R), Sonata(R) and Adenoscan(R);
dependence on whether Skelaxin(R) continues as an exclusive product;
dependence on whether King's customers order pharmaceutical products in excess
of normal quantities during any quarter which could cause the Company's sales
of branded pharmaceutical products to be lower in a subsequent quarter than
they would otherwise have been; dependence on the accuracy of King's estimate
of wholesale inventory levels of its products; dependence on the extent to
which Inventory Management Agreements facilitate effective management of
wholesale channel inventories of the Company's products and the accuracy of
information provided to the Company pursuant to such agreements and by other
third parties; dependence on King's ability to continue to successfully
execute the Company's strategy and to continue to capitalize on strategic
opportunities in the future for sustained long-term growth; dependence on the
availability and cost of raw materials; dependence on no material
interruptions in supply by contract manufacturers of King's products;
dependence on the potential effect on sales of the Company's existing branded
pharmaceutical products as a result of the potential development and approval
of a generic substitute for any such product or other new competitive
products; dependence on the potential effect of future acquisitions and other
transactions pursuant to the Company's growth strategy; dependence on King's
compliance with FDA and other government regulations that relate to the
Company's business; dependence on King's ability to conduct its webcast as
currently planned on August 9, 2005; and dependence on changes in general
economic and business conditions; changes in current pricing levels; changes
in federal and state laws and regulations; changes in competition; unexpected
changes in technologies and technological advances; and manufacturing capacity
constraints. Other important factors that may cause actual results to differ
materially from the forward-looking statements are discussed in the "Risk
Factors" section and other sections of King's Form 10-K for the year ended
December 31, 2004 and Form 10-Q for the first quarter ended March 31, 2005,
which are on file with the SEC. King does not undertake to publicly update or
revise any of its forward-looking statements even if experience or future
changes show that the indicated results or events will not be realized.
KING PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30,
2005 December 31,
ASSETS (Unaudited) 2004
Current assets:
Cash and cash equivalents $565,566 $342,086
Restricted cash 130,400 97,730
Marketable securities 7,471 16,498
Accounts receivable, net 195,031 180,963
Inventories 222,995 274,412
Deferred income tax assets 122,857 153,979
Prepaid expenses and other current assets 57,140 61,395
Total current assets 1,301,460 1,127,063
Property, plant and equipment, net 284,615 280,731
Intangible assets, net 1,092,206 1,285,961
Goodwill 121,152 121,152
Deferred income tax assets 138,173 92,931
Other assets 27,105 16,318
Total assets $2,964,711 $2,924,156
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $62,190 $92,920
Accrued expenses 535,547 596,010
Income taxes payable 57,048 -
Total current liabilities 654,785 688,930
Long-term debt 345,000 345,000
Other long-term liabilities 26,829 41,436
Total liabilities 1,026,614 1,075,366
Commitments and contingencies:
Shareholders' equity:
Common shares no par value, 300,000,000
shares authorized, 241,735,433 and
241,706,583 shares issued and
outstanding, respectively 1,210,734 1,210,647
Retained earnings 727,672 637,120
Accumulated other comprehensive income (309) 1,023
Total shareholders' equity 1,938,097 1,848,790
Total liabilities and shareholders'
equity $2,964,711 $2,924,156
KING PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
(Unaudited) (Restated) (Unaudited) (Restated)
REVENUES:
Total revenues $462,939 $275,611 $831,564 $567,061
OPERATING COSTS AND EXPENSES:
Cost of revenues, exclusive
of depreciation, amortization
and impairments shown
below 91,204 80,538 165,002 163,903
Excess purchase commitment - - (1,582) 176
Writeoff of acquisition
related inventory
step-up/recall - 4,586 - 4,586
Total cost of revenues 91,204 85,124 163,420 168,665
Selling, general and
administrative, exclusive
of co-promotion fees 96,213 99,132 185,411 181,042
Special legal and
professional fees 5,210 4,993 8,862 10,685
Medicaid related charge - 65,000 - 65,000
Mylan transaction costs 155 3,126 3,432 3,126
Co-promotion fees 57,587 19,402 92,242 42,946
Total selling, general,
and administrative expense 159,165 191,653 289,947 302,799
Depreciation and amortization 39,920 38,466 81,346 77,784
Research and development 17,500 17,478 28,972 33,501
Intangible asset impairment 126,923 - 126,923 34,936
Restructuring charges (17) 6,153 2,006 6,153
Special gains on disposition (591) (3,421) (1,438) (4,279)
Total operating costs and
expenses 434,104 335,453 691,176 619,559
OPERATING INCOME 28,835 (59,842) 140,388 (52,498)
OTHER (EXPENSES)
INCOME:
Interest expense (3,039) (3,266) (5,740) (6,371)
Interest income 3,933 1,081 6,210 2,135
Valuation charge - convertible
notes receivable - (2,438) - (2,887)
Write-down of investment (369) - (7,222) -
Other (expense) income, net (1,047) 1,168 (1,296) 465
Total other expense (522) (3,455) (8,048) (6,658)
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 28,313 (63,297) 132,340 (59,156)
Income tax expense 7,271 986 44,193 2,825
INCOME (LOSS) FROM CONTINUING
OPERATIONS 21,042 (64,283) 88,147 (61,981)
DISCONTINUED OPERATIONS
(Loss) income from discontinued
operations, including loss
on impairment (849) 2,148 3,833 (165,314)
Income tax (benefit) expense (304) 789 1,428 (60,295)
Total (loss) income from
discontinued operations (545) 1,359 2,405 (105,019)
NET INCOME (LOSS) $20,497 $(62,924) $90,552 $(167,000)
Basic income (loss) per
common share $0.08 $(0.26) $0.37 $(0.69)
Diluted income (loss) per
common share $0.08 $(0.26) $0.37 $(0.69)
Shares used in basic net income
(loss) per share 241,732 241,383 241,728 241,341
Shares used in diluted net
income (loss) per share 241,783 241,383 241,793 241,341
KING PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
EXCLUDING SPECIAL ITEMS - NON GAAP
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
(Unaudited) (Restated) (Unaudited) (Restated)
REVENUES:
Total revenues $462,939 $275,611 $831,564 $567,061
OPERATING COSTS AND EXPENSES:
Cost of revenues, exclusive
of depreciation, amortization
and impairments shown below 91,204 80,538 165,002 163,903
Selling, general and
administrative, exclusive
of co-promotion fees 96,213 99,132 185,411 181,042
Co-promotion fees 57,587 19,402 92,242 42,946
Total selling, general,
and administrative expense 153,800 118,534 277,653 223,988
Depreciation and amortization 39,920 38,466 81,346 77,784
Research and development 17,500 17,478 28,972 33,501
Total operating costs and
expenses 302,424 255,016 552,973 499,176
OPERATING INCOME 160,515 20,595 278,591 67,885
OTHER (EXPENSES) INCOME:
Interest expense (3,039) (3,266) (5,740) (6,371)
Interest income 3,933 1,081 6,210 2,135
Other (expense) income, net (1,047) 1,168 (1,296) 465
Total other expense (153) (1,017) (826) (3,771)
INCOME BEFORE INCOME TAXES 160,362 19,578 277,765 64,114
Income tax expense 53,644 6,766 94,970 22,931
NET INCOME $106,718 $12,812 $182,795 $41,183
Basic income per common share $0.44 $0.05 $0.76 $0.17
Diluted income per common share $0.44 $0.05 $0.76 $0.17
Shares used in basic net income
per share 241,732 241,383 241,728 241,341
Shares used in diluted net
income per share 241,783 241,745 241,793 241,754
KING PHARMACEUTICALS, INC.
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share data)
The following tables reconcile Non-GAAP measures to amounts reported under
GAAP:
Three Months Ending Six Months Ending
June 30, 2005 June 30, 2005
(Unaudited) EPS (Unaudited) EPS
Net income, excluding
special items $106,718 $182,795
Diluted income per common
share, excluding special
items $0.44 $0.76
SPECIAL ITEMS:
Excess purchase commitment
(cost of goods sold) - - 1,582 0.01
Special legal and professional
fees (selling, general, and
administrative) (5,210) (0.02) (8,862) (0.04)
Mylan transaction costs
(selling, general, and
administrative) (155) (0.00) (3,432) (0.01)
Intangible asset impairment
(other operating costs and
expenses) (126,923) (0.52) (126,923) (0.52)
Restructuring charges
(other operating costs and
expenses) 17 0.00 (2,006) (0.01)
Special gains on disposition
(other operating costs and
expenses) 591 0.00 1,438 (0.00)
Write-down of investment
(other expenses) (369) (0.00) (7,222) (0.03)
(Loss) income from
discontinued operations (849) (0.01) 3,833 0.01
Income tax benefit 46,677 0.19 49,349 0.20
Net income $20,497 $90,552
Diluted income per common
share, as reported under GAAP $0.08 $0.37
Three Months Ending Six Months Ending
June 30, 2004 June 30, 2004
(Restated) EPS (Restated) EPS
Net income, excluding
special items $12,812 $41,183
Diluted income per common
share, excluding special items $0.05 $0.17
SPECIAL ITEMS:
Excess purchase commitment
(cost of goods sold) - - (176) (0.00)
Writeoff of acquisition related
inventory step-up/recall
(cost of goods sold) (4,586) (0.02) (4,586) (0.02)
Special legal and professional
fees (selling, general, and
administrative) (4,993) (0.02) (10,685) (0.04)
Medicaid related charge (selling,
general, and administrative) (65,000) (0.27) (65,000) (0.27)
Mylan transaction costs (selling,
general, and administrative) (3,126) (0.01) (3,126) (0.01)
Intangible asset impairment (other
operating costs and expenses) - - (34,936) (0.14)
Restructuring charges (other
operating costs and expenses) (6,153) (0.03) (6,153) (0.03)
Special gains on disposition
(other operating costs and
expenses) 3,421 0.02 4,279 0.02
Valuation charge - convertible
notes receivable (other expense) (2,438) (0.01) (2,887) (0.01)
Income (loss) from discontinued
operations 2,148 0.01 (165,314) (0.69)
Income tax benefit 4,991 0.02 80,401 0.33
Net loss $(62,924) $(167,000)
Diluted loss per common share,
as reported under GAAP $(0.26) $(0.69)
KING PHARMACEUTICALS, INC.
Summary Reconciliation of Special Items
for the Second Quarter Ending June 30, 2005
and the Second Quarter Ending June 30, 2004
King recorded special items during the second quarter ending June 30, 2005
totaling a net charge of $132.9 million, or $86.2 million net of tax. More
specifically, special items during the second quarter of 2005 include:
- an intangible asset impairment charge totaling $126.9 million related to
Sonata(R);
- a $5.2 million charge primarily for professional fees associated with
ongoing OIG and SEC inquiries;
- a charge of $0.8 million resulting from discontinued operations;
- a $0.4 million charge to reflect a decline in the fair value, which the
Company believes is other than temporary, of King's equity investment in
Novavax;
- a charge of $0.2 million for professional fees and expenses associated
with the Company's terminated merger agreement with Mylan; and
- income of $0.6 million primarily from special gains on disposition of
some assets.
During the second quarter ending June 30, 2004, King recorded special
items resulting in a net charge of $80.7 million, or $75.7 million net of tax,
primarily due to a $65.0 million charge representing the Company's estimate of
the interest, costs, fines, penalties and all other amounts in excess of the
$65.4 million King previously accrued for purposes of resolving the ongoing
OIG and SEC inquiries.
KING PHARMACEUTICALS, INC.
Summary Reconciliation of Special Items
for the Six Months Ending June 30, 2005
and the Six Months Ending June 30, 2004
King recorded special items during the six months ending June 30, 2005
totaling a net charge of $141.6 million, or $92.2 million net of tax,
primarily due to an intangible asset impairment charge totaling $126.9 million
related to Sonata(R).
During the six month period ending June 30, 2004, King recorded special
items resulting in a net charge of $288.6 million, or $208.2 million net of
tax, primarily due to a loss from discontinued operations that resulted from
the Company's decision to divest two of its women's health products, a $65.0
million charge representing the Company's estimate of the interest, costs,
fines, penalties and all other amounts in excess of the $65.4 million King
previously accrued for purposes of resolving the ongoing investigations of the
Company by the OIG and SEC, and an intangible asset impairment charge.
SOURCE King Pharmaceuticals, Inc.
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Related links:
http://www.kingpharm.com
CONTACT:
James E. Green, Executive Vice President,
Corporate Affairs, +1-423-989-8125, David E. Robinson, Senior
Director, Corporate Affairs, +1-423-989-7045, both of King
Pharmaceuticals, Inc.
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